Are you over 70 1/2 and own an IRA? Take advantage of the “Qualified Charitable Distribution” (QRD) rules to get more tax bang for your charitable contribution bucks.

Here’s how it works. The usual way of getting a tax deduction for a charitable contribution is to write a check to your favorite 501(c)(3) tax-exempt organization. You take the payment as an itemized deduction on Schedule A of your tax return. Not bad, but…

If you’re over 70 1/2, you can direct your IRA trustee to make charitable contributions (up to $100,000 per year) directly from your IRA to the charity. The IRA distributions that go to charity are not considered a taxable IRA distribution. You don’t take the deduction on Schedule A, but the effect is the same since you’re knocking down your taxable income by the amount of the gift. You also get these additional potential benefits:

If you don’t ordinarily itemize, you can take your standard deduction and get the benefit of the charitable contribution from your IRA.

If you do itemize and have medical or investment expenses, your “hurdle” for deducting these expenses is taken down a notch.

If you have low income but large assets and want to get a tax benefit from charitable contributions, you won’t be subject to the “50% of AGI” charitable contribution limitation” .

If you hate having to take a Required Minimum Distribution from your IRA, you can take the RMD as a charitable contribution, satisfy the RMD requirement, but not take the distribution into income.

Did you receive a letter from the North Carolina Department of Revenue that your tax return or extension was filed “late,” even though it was postmarked by April 18? The NCDOR has acknowledged that it sent “late filing” letters earlier this spring which were incorrect. Evidently the NCDOR had a software glitch due to confusion and changes to the initial due date for 2015 income tax returns. However, they have since realized this error, and evidently another letter went out on Wednesday June 15 to those who had formerly received erroneous “late filing” letters.
-BDB

Clients and friends, the federal government recently passed the “Consolidated Appropriations Act” which included a number of significant tax provisions. Some tax rules which formerly had to be re-authorized every year are now permanent. Some tax rules were extended through 2019. Others were delayed, and there were a few new items passed. If you have not received an email from us with more details about this legislation, get in touch with us and we would be happy to email you a copy.

An IRS ruling this week highlights opportunities for businesses to create “above-the-line” deductions for payments made for charities that otherwise might be treated as itemized deductions.

If a business makes a payment to a charitable organization that can reasonably be expected to enhance business, it can be treated as a marketing/advertising expense. An example might be a sponsorship of a charity’s event which would provide publicity for a business. Treating such an expenditure as a marketing expense rather than charitable contribution would allow the deduction to reduce gross income, rather than provide an itemized deduction which could be subject to certain limitations. This treatment would be particularly beneficial for a sole proprietorship or single-member LLC, in which case the deduction would typically decrease both income tax and self-employment tax.

If you want to look up an example, see “IRS Chief Council Advice 201543013”

Valued clients – remember than there are only a couple months left in the year to take certain steps which could save you taxes when you file your 2015 return in April, 2016. Please don’t hesitate to get in touch with us if we can provide guidance in any way!